Renault to shift more production to Turkey: sources

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Published October 05, 2012

| Reuters

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PARIS – French automaker Renault plans to build more than 70 percent of its Clio subcompacts in Turkey, union sources said, in a shift abroad that could inflame tensions with workers and the government, its biggest shareholder.

During internal presentations, Renault disclosed plans to source less than 30 percent of the new Clio model from France, according to two union officials who declined to be identified.

"This was presented as a decision," one of the sources said.

A Renault spokesman declined to comment on production plans for the fourth-generation Clio, France's second-bestselling car this year. Some 41 percent of its last version were built domestically, with 46 percent sourced from Turkey and 13 percent from Spain.

With unemployment at a 13-year high, French President Francois Hollande's government has pledged to reverse the trend within a year and is already pressuring high-profile companies such as ArcelorMittal and Sanofi to keep jobs in France.

Domestic plants accounted for 42 percent of Renault's overall European deliveries last year. That compares with 64 percent for rival PSA Peugeot Citroen , which drew ministerial wrath by announcing 8,000 job cuts and a plant closure earlier this year.

Renault's gradual transfer of production to lower-wage economies has already proved to be a sore point in relations with the French state, which owns 15 percent of the automaker.

Chief Executive Carlos Ghosn was summoned for a public dressing-down by former President Nicolas Sarkozy in 2010, after reports first emerged that the Clio could move abroad.

Renault responded at the time with a pledge to maintain production levels in Flins, west of Paris, until output of its Zoe electric cars had ramped up to take the Clio's place.

But the shift to Turkey is going ahead, the sources said, even as Zoe manufacturing volumes remain an unknown - with deliveries not due to start until early next year.

"There's no visibility on how many Zoes they're going to produce - and it's unclear who's buying them at this stage," London-based UBS analyst Philippe Houchois said.

"They're obviously under pressure and may have to decide whether to build more (Clios) in France to keep the peace with the government."

Sales of electric cars including Japanese affiliate Nissan's <7201.T> Leaf have so far failed to meet expectations.

Paris-based Peugeot has also halted the supply of re-badged electric cars from Mitsubishi Motors <7211.T> to run down its stock of unsold vehicles.

Renault is also asking its unions for nationwide concessions on pay and conditions to avert mass layoffs of the kind announced by Peugeot, Chief Operating Officer Carlos Tavares said last week in an interview at the Paris auto show.

Deliveries of the new Clio were set to begin as the car makes its public debut at the show, which runs until October 14.